A traditional portfolio conversation can quickly turn to percentages: How much should be in stocks? Bonds? Cash? Private investments?
At Heritage, we believe there is a more important conversation to have first: What does this capital actually need to do for the family?
Portfolio construction is downstream from that answer. A family’s objectives, spending needs, time horizon, tax profile, and liquidity requirements first inform its financial plan. That plan, in turn, helps inform how the portfolio is constructed.
Start in Dollars, Not Percentages
One of the clearest examples is liquidity.
We seek to understand a family’s identified liquidity needs over the next 12 to 36 months: upcoming tax payments, spending needs, a home purchase, or other known obligations and goals.
We think about those needs first in dollar terms.
Rather than beginning with a predetermined percentage allocation and asking the family to fit within it, we can begin with the capital the family expects to need and work outward from there.
That distinction matters. If a family knows it will need a certain amount of capital over the next several years, that information can influence what should remain liquid and what may be invested with a longer time horizon.
Asset Allocation Comes Next
Once those needs are understood, the conversation can move to asset allocation.
Heritage conducts strategic asset allocation work across broader asset classes—including equities, fixed income, cash, and gold—and considers how those allocations may vary based on factors such as risk tolerance and liquidity needs.
But that framework is a starting point, not the entire answer.
Two families may own many of the same underlying investments and still have meaningfully different portfolio allocations. One may need greater liquidity. Another may have the ability and willingness to take on additional risk. Their tax circumstances may differ. Their timelines may differ.
Those circumstances help determine how the broader investment framework is applied to each family.
One Portfolio, Not Separate Pieces
The same thinking applies within the investment portfolio itself.
For clients who hold both public and private investments, we do not view them as two unrelated portfolios. We consider them together as part of the total portfolio—including how decisions may affect overall risk, liquidity, and exposure.
The principle extends beyond investments. An upcoming tax payment can affect liquidity. A home sale can create a new inflow of capital. A planned purchase can change what should remain readily available.
This is where coordination becomes important.
Because Heritage’s investment team works alongside our financial planning and tax teams, information about those changing needs can become part of the portfolio conversation.
The investment decision is therefore not made only at the investment level. We also consider what it means for the portfolio as a whole—and for the family that portfolio is intended to serve.
The Portfolio Has a Job to Do
Portfolio construction is more than assembling a collection of attractive investment ideas. It is the process of determining how investments should work together in service of a family’s goals.
That is why the percentages come later.
First come the family’s goals and obligations. Then the financial plan. Then the liquidity needs and risk considerations. From there, the portfolio begins to take shape.
The portfolio is downstream by design—built around the family’s goals, obligations, and the life their wealth is intended to support.